By: Steven Cernak & Luis Blanquez (The Antitrust Attorney)
Earlier in February 2023, the Court for the Northern District of California denied the FTC’s preliminary injunction motion to prevent the closing of Meta Platforms Inc.’s acquisition of Within Unlimited, Inc.––a virtual reality (VR) App developer. The FTC has declined to appeal the loss and has paused its administrative in-house challenge. Meta has now closed the transaction. Below we summarize the key points from the opinion and what we think are the two key takeaways for merger practitioners.
Opinion Summary
As with many contested mergers, a key legal battle in this case was market definition. The FTC proposed a relevant product market consisting of VR dedicated fitness apps, meaning VR apps “designed so users can exercise through a structured physical workout in a virtual setting.” The merging parties, on the other hand, alleged that the FTC’s proposed market definition was too narrow, excluding “scores of products, services, and apps” that are “reasonably interchangeable” with VR dedicated fitness apps, including VR apps categorized as “fitness” apps on Meta’s VR platform, fitness apps on gaming consoles and other VR platforms, and non-VR connected fitness products and services”. Extensively quoting Brown Show and that venerable opinion’s “practical indicia” of a market, the Court held that the FTC made a sufficient evidentiary showing of a well-defined submarket, consisting of VR dedicated fitness apps.
Having won that battle, the FTC argued that the proposed acquisition would violate Section 7 of the Clayton Act by substantially lessening competition in the market for VR dedicated fitness apps. According to the agency, even though Meta was not currently a competitor in the VR dedicated fitness app market, it was both (i) an actual potential competitor, and (ii) a perceived potential competitor in the relevant market. In the first theory, the FTC argued that the transaction harmed competition because Meta would have entered the market on its own. In the second theory, the FTC argued that Meta’s mere presence on the wings of the market before the transaction kept current participants from acting anticompetitively…
